Small company management
The bulk of the time of a search fund is spent managing a small company. Due to the size of the targets most of them use simple processes and systems. When a searcher steps in as CEO there are many things that can be improved. However, it pays to be patient and learn before making any change. After all, the company is doing well and the management team often has a pretty good business intuition about what works and what doesn´t. Introducing fact-based decision making and improving processes is definitely a way in which the searcher can add value but having the buy-in of the employees is even more important. Being humble and listen is an obvious way but almost things like relaxing the dress code can help getting early-wins and earning trust.
Recurring revenue helps to make a smooth transition
A company that is doing well could be impacted negatively by a change in management: transitions can get complicated because of a number of reasons. Recurring revenues is probably the single best characteristic to ensure a great transition. Customers are already in a long-term contract when the change in management happens. So there will always be a period of time in which the customers will work with the new management. They can still not renew the contract in case they don´t like the new CEO. But there is a difference between not buying because management is new (without knowing whether it would be better or worse) and not buying because they have worked with the new management and they don´t like it.
I can think about other characteristics such as high product differentiation but recurring revenue strikes me as the best.
Search fund community
The search fund community is helpful and open. I wonder if this will change in case the number of search funds keeps increasing at the current rate.
All in all, a search fund is fairly limited geographically. It is really rare for a searcher to look for companies in more than one country so there is always an opportunity to reach out to searchers operating in other countries and even searchers that have already acquired a company.
Relationship with investors
Investors get very involved in the operation of search fund and they act as mentors. But they are still investors. I think it could be difficult to strike a balance in this relationship. You want to be coachable and reach out for advice, yet you want to show that their investment is safe with you. I had never thought of this but it can be a real challenge. I guess it really depends on the personality of each investor.